Impact of Firm‐Based Environmental Standards on Subsidiaries and Their Suppliers: Evidence from Motorola‐Penang

Abstract

How successful are multinational corporations in extending their firm‐based environmental standards to their subsidiaries and those subsidiaries' local suppliers in their global production networks in developing countries? We address this question through an in‐depth case study of how Motorola, a prominent multinational electronics firm with an extensive global production network, is using a set of firm‐based standards to meet several new stringent European Union environmental directives. The case study demonstrates that these firm‐based standards appear to be enabling a major subsidiary and its suppliers in one developing economy to reduce the environmental intensities of their production activities. This finding suggests that the firm‐based environmental standards of multinationals with extensive global production networks might contribute to a leveling up of environmental standards in subsidiaries and their local suppliers, rather than a “race to the bottom”, thus reinforcing the technique or intensity effects associated with open trade, investment, and technology policies.